Philippines Discussion Notes


Action 2.1 Mainstream adaptation and disaster risk management



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Action 2.1 Mainstream adaptation and disaster risk management


  1. At present, climate risk and disaster risk management concerns are still not mainstreamed in PPPs (policies, plans, and programs) at the national, sub-national and sectoral levels, although a number of sectors and a few LGUs (e.g., Province of Albay, Makati City) have started doing this. The government can use the existing review and approval process of sector programs and projects by the National Economic Development Authority – Interagency Coordination Committee (NEDA-ICC) to mainstream climate change in these programs and projects. The NEDA-ICC review guidelines can be amended to include mainstreaming of climate change into any programs and projects proposed by sector agencies. In line with this, NEDA also needs to revisit the formula for computing a project’s financial internal rate of returns (FIRRs) to take into consideration the additional cost and benefits involved in protecting investments from the impacts of climate change. For example, designing climate-resilient irrigation systems and farm-to-market roads may entail reduction in the project’s overall FIRR using the current formula used by NEDA because of the additional investment cost. The long term gains, however, of protecting investments from climate change impacts may outweigh the initial cost.




  1. The preparation of the 2011-2016 PDP presented a good opportunity to mainstream CC and DRM in key decision-making processes by incorporating the results of relevant studies (e.g., vulnerability assessments), the establishment of CC scenarios for development planning, programming and project evaluation purposes, expert panels, and stakeholder consultations. At the LGU level, mainstreaming can take place in many different ways. One is through the LGU’s comprehensive land use plan required under the Local Government Code. Another is through the 5-year development plan and the annual investment plan of the LGU. The government and funding institutions may require mainstreaming before agreeing to finance any investment at the local level.

Box 4: Cost considerations for adaptation and mitigation

Before advancing detailed proposals, it may be instructive to reflect briefly on the costs involved. No precise estimates can be made due to the uncertainty of the impacts of climate change, but rough orders of magnitude can be provided. The main conclusion is that much can be achieved at costs that are small in comparison with the overall size of the economy, or the size of baseline investments.

The costs of adaptation will depend greatly on the degree of climate change, but some estimates are possible. A recent study (World Bank, 2009b) estimated the global costs for adaptation (2010-2050) in several forms. The three most costly areas are (i) coastal zones; (ii) infrastructure; and (iii) water supply and flood protection. The study is global and only regional and global estimates are reported. For coastal zone adaptation, the increased costs of adaptation were estimated for different categories of countries. Using the estimates for “deltaic and small island states” the average annual cost is in the order of 0.01 percent of the GDP.41 For infrastructure, the costs are calculated by region and in relation to the baseline investment scenario. The increase in costs for adaptation in East Asia is less than 2 percent of the baseline infrastructure investment. The water supply and flood protection costs for East Asia are about 10-20 percent of the increased costs for infrastructure.



For mitigation, a reduction in cumulative GHG emissions from the power sector by 25 percent until 2030 would cost about 5 percent more than the baseline. A reduction of 50 percent would increase the cost by about 15 percent. Comparative figures for the transport sector are not available. But a reduction of those cumulative emissions by 25 percent would cost about US$11 billion (more than 500 billion pesos) in cumulative investments until 2030, and a reduction of 50 percent would cost about US$26 billion (1,200 billion pesos). (Esguerra et al, forthcoming).



Action 2.2 Improve disaster preparedness and response


  1. The government’s focus is on strengthening the capacities of institutions, especially at the local level, to reduce vulnerabilities to the impacts of natural disasters and to better manage disaster risks. The country’s disaster management system is mostly reactive and natural hazard risk management is not well integrated into development planning. There are a few local initiatives undertaken such as those in the province of Albay, which is taking a strong initiative to promote climate risk management and disaster preparedness. This is the first LGU to work on disaster- and climate-proof adaptation measures, including strengthening and improving evacuation sites, introducing climate change into school curricula and training of local officials. The country’s poor preparedness to respond to natural disasters was exposed by Typhoon Ondoy.


Action 2.3 Protect key infrastructure and livelihoods against climate change impacts


  1. Despite the country’s vulnerability, past and current interventions have focused largely on mitigation and only recently has adaptation been given attention. The Philippine Climate Change Adaptation Project is a key step towards helping the agriculture and natural resource management sectors to be made more climate-resilient. What this means is to identify risks (hazard, exposure, vulnerability) to specific assets as a result of climate variability and change, and to make sure that those risks are lowered through modifications of investment in a manner that is technically and environmentally sound, economically viable, and socially acceptable. For example, in the design for repair or construction of irrigation systems, rather than business as usual, climate risks can be included to make the systems more resilient. This may mean an additional investment cost, but savings would be considerable over the long term because of the resiliency of the system and the potential reduction in future rehabilitation and maintenance cost. The approaches developed could then be replicated elsewhere in the Philippines. Currently, infrastructure is designed based on historical climatic records, but future infrastructures will need to be designed based on predicted temperature changes and concomitant impact, and existing ones protected against the impacts of climate change.


Action 2.4 Develop financing facilities for adaptation and disaster response


  1. There is still some way to go in the development of significant international adaptation funds. The Copenhagen negotiations in December 2009 resulted in the Copenhagen Accord (UNFCCC, 2009), which takes note of the collective commitments by developed countries to provide new and additional resources, “… approaching US$30 billion for the period 2010-2012 with balanced allocation between adaptation and mitigation.” While the details of that Accord is being worked out, the government can explore innovative financing mechanisms to finance adaptation and disaster response. One mechanism is taxation of GHG emitting or polluting sources, such as coal-fired power plants, based on every kilowatt of power produced, or a “green tax” on gasoline. The funds collected could be earmarked for adaptation programs. The principle is very similar to the Royalty tax imposed under Energy Regulation 1-94 of the Department of Energy, which requires energy projects to set aside small percentage of the proceeds based on per kilowatt generated for electrification and reforestation programs. Another mechanism is the taxation of CDM projects to finance adaptation activities. An example of this mechanism is the HFC-23 project in China, where the government established regulations that set aside 65 percent of the revenues of HFC-23 CDM transactions to constitute a CDM fund. Other innovative financing that can be explored include allowing individuals and firms to allocate up to a certain percentage of their income tax to adaptation activities/programs. A law could be passed to support this mechanism. This was done in Guayaquil area in Ecuador for environmental clean-up work. Another option is for companies, as part of their corporate social responsibility, to implement adaptation programs or set aside certain percentage of their revenues to support adaptation activities.


Policy Area 3: Climate change mitigation programs in key sectors
Action 3.1 Undertake selected mitigation programs using available financing facilities


  1. Despite the Philippines’ being a minor emitter of GHGs, selective mitigation programs can be undertaken in sectors where emissions are on the rise. These include energy, transport and waste sectors, which show a strong emission increase under the business as usual scenario. The implementation of mitigation programs, albeit selectively, will help the country to sustain growth via a low carbon pathway, while attaining local environmental benefits through improved environmental quality. New mitigation financing instruments are available, particularly the Clean Technology Fund (CTF) and the Carbon Partnership Facility (CPF) (see Annex 1). The Philippines already has an approved Investment Plan under CTF (CIF, 2009). This plan entails CTF cofinancing of US$250 million to support scaled-up distributed generation with renewable energy resources and address transmission constraints through demand side management. The Investment Plan will also implement the government’s National Environmentally Sustainable Transport Strategy (NESTS) which aims to reduce energy consumption in the transport sector. The CTF investments will mobilize financing of about US$2.5 billion from the government, multilateral development banks, carbon finance and the private sector. The following are some of the areas and which can be considered under these programs.




  • Sustainable transport and renewable energy are among the programs identified under the Philippine Investment Plan to be financed by the CTF, which is blended with concessional financing from multi-lateral agencies like the World Bank Group and the Asian Development Bank. The Bus Rapid Transit projects in Metro Manila and Metro Cebu are good candidates for the CTF. Energy efficient building and street lighting planned for big cities such as Quezon City and Marikina City can also be supported by the CTF, as well as the development of renewable energy sources such as geothermal and wind.




  • Waste management is another candidate sector for CPF assistance. There is potential to develop the programs of activities (PoAs) for treatment systems for distillery waste, slaughterhouse waste and domestic waste water. The biggest challenge is to find a managing and coordinating entity (CME) that could develop the PoAs. Government financial institutions such as the Development Bank of the Philippines and the Land Bank of the Philippines are good candidate CMEs because of their role in providing financing to project developers. The financing package they offer could include accessing carbon credits for eligible projects through enrolment under the CPF PoA. A programmatic/wholesale approach to developing the PoAs would be the key as opposed to developing and processing individual projects. The approach is more efficient and allows small scale interventions to participate and benefit from the carbon market. An example of this approach is the PoA for pig waste treatment system and for sanitary landfill developed by the Land Bank of the Philippines.


References
CIF (Clean Investment Funds), 2009: Clean Technology Fund: Investment Plans for Philippines. Inter-sessional Meeting of the CTF Trust Fund Committee, Washington, D.C. December 1-2, 2009CTF/TFC.IS.1/4
DENR. 1999. The Philippines’ Initial National Communication on Climate Change (PINCC). Manila.
Esguerra, G.C. Tiangco, S. Custodio and N. Gabiola. (Forthcoming). A Strategic Approach to Climate Change in the Philippines: An Assessment of Low-Carbon Interventions in the Transport and Power Sectors. Manila.
IPCC, 2007a: Climate Change Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change [B. Metz, O.R. Davidson, P.R. Bosch, R. Dave, L.A. Meyer (eds)], Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.
IPCC, 2007b: Summary for Policymakers. In: Climate Change, 2007: The Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change [Solomon, S., D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Averyt, M.Tignor and H.L. Miller (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.
Philippines. 2009. Typhoons Ondoy and Pepeng: Post-Disaster Needs Assessment. November 26, 2009. Processed.
UNFCCC, COP15, 2009: Copenhagen Accord. Decision -/CP.15. Advance unedited version. Copenhagen. http://unfccc.int/2860.php. Accessed December 28, 2009.
World Bank, 2009a: Country Environmental Analysis. Manila.
World Bank, 2009b: The Costs to Developing Countries of Adapting to Climate Change: New Methods and Estimates. The Global Report of the Economics of Adaptation to Climate Change Study. Consultation Draft. Washington, D.C.
World Bank, 2009c: World Development Report 2010. Development and Climate Change. Washington, D.C.

WRI (World Resources Institute). 2009. CAIT Yearly Emissions. Climate Analysis Indicators Tool (CAIT) Version 6.0. Accessed January 31, 2010. http://cait.wri.org/cait.



Note prepared by:
Jan Bojö (EASER) and Joe Tuyor (EASPS)

The World Bank



March 5, 2010
Annex 1

Climate Change Financing Facilities
Mitigation
The Philippines is on a growth path that will lead to much higher emissions in the future. Funding and assistance for nationally appropriate GHG mitigation programs can have significant co-benefits: Investments that reduce GHG emissions will also help to reduce the country’s dependence on imported fossil fuels, reduce local environmental pollution, and stimulate economic development.
The Clean Technology Fund (CTF) seeks to scale up financing to contribute to demonstration, deployment, and transfer of low-carbon technologies with a significant potential for long-term GHG emissions savings. It includes programs in (i) the power sector, such as renewable energy and more power supply technologies; (ii) the transport sector, e.g., through improvements in public transportation; and, (iii) energy efficiency in buildings, industry and agriculture.
Greater energy efficiency, a move towards renewables and a shift towards public transportation would all have significant co-benefits in terms of reducing urban air pollution. The Country Environmental Analysis for the Philippines (World Bank, 2009a) estimated that more than 1 million people get sick every year due to outdoor air pollution (OAP) in urban areas. About 15,000 people die prematurely due to OAP.
The Carbon Partnership Facility (CPF) has the potential to be an important spring-board for the Philippines to achieve transformational change in GHG emitting sectors. The CPF purchases certified emission reductions under the CDM or other market schemes and offers a platform for collaboration of public and private sector partners from developed and developing countries. CPF programs are under development in Brazil, China, Indonesia, Mexico, Morocco, and Vietnam. The Philippines is exploring the possibility of mobilizing CPF for the program of activities (PoAs) in the waste management sector. An international conference was held in October 2009 and resulted in the identification of a number of potential PoAs including wastewater treatment systems for distillery waste, slaughter house waste and domestic waste water. The partnership comprises two trust funds: (i) the Carbon Asset Development Fund to prepare emission-reduction programs, and (ii) the Carbon Fund to purchase carbon credits from the pool of emission reduction programs. The CPF is open for all types of activities that (i) reduce greenhouse gases, and (ii) are suitable for scaling up, i.e., can be replicated as part of a program. Examples of the types of programs that can be included in the CPF portfolio include: power sector development, energy efficiency, gas flaring reduction, transport sector improvements and urban development programs.
Adaptation
There are grant financing windows that can be tapped by the country to implement adaptation measures and/or blend with loan financing to generate bigger impacts on implementing adaptation measures. As noted in the main text, the follow-up to the Copenhagen negotiations may well increase this type of funding significantly.
The Global Environment Facility (GEF) has been the main source of grants and concessional funding for adaptation projects globally. The first Philippine Climate Change Adaptation Project, which is under preparation by the World Bank, is to be financed by GEF.
The Adaptation Fund under the UNFCCC will finance adaptation projects and programs. Funding comes from a 2 percent “tax” on certified emission reductions (CERs) issued under the Kyoto Protocol’s Clean Development Mechanism. However, the fund is not yet operational.
The Global Facility for Disaster Reduction and Recovery (GFDRR) aims at mainstreaming disaster reduction and climate change adaptation measures in developing countries to reduce vulnerabilities to natural hazards. GFDRR funds disaster risk assessments, risk mitigation policies and strategies, disaster prevention preparation projects and recovery. The program has three tracks that support global, regional and country specific activities. There is already a US$1 million program in the Philippines, and this is expected to grow.
Donors are working with the government to assess disaster risk at the provincial level, as a tool for designing local strategies. These risk profiles are based on historical data and cannot forecast events associated with climate change. Further work to strengthen the scientific basis for climate change risk modeling is required.

PHILIPPINES Discussion Note No. 20

Environment

Environment and Natural Resources: Investing for a Sustainable Future
The Philippines is greatly endowed with abundant natural resources and a unique blend of landscapes and seascapes. Despite the passage of comprehensive laws and issuance of many policies, factors such as weak institutions, poor planning and management, and inadequate livelihood opportunities for natural resources-dependent communities have led to a serious deterioration of the environment. It is critical to recognize that environmental degradation is costly: the economic cost of environment and natural resource degradation is placed at some Php270 billion annually (based on conservative estimates of economic losses due to water pollution, outdoor and indoor air pollution, marine and coastal resource management, deforestation and land degradation). As the Philippines continues to suffer from dwindling ‘old-growth’ forest cover, land, air and water deterioration, etc., there are real opportunities for environmentally sustainable growth. While there are efforts made to instill environmental due diligence in development projects, many well-meaning piecemeal reforms have not managed to deal with the major problems of the environment. Thus, the political will to regulate human activities coupled with the proper devolution of functions and capacity strengthening of institutions and LGUs leading to a well-coordinated implementation of laws should be intensified. Proposed below are priority areas of actions to manage the environmental challenges identified, and identify opportunities for reform and interventions.


  1. The Philippines Today: Progress and Challenges


1. The attention given to balancing utilization and conservation of natural resources, as seen in policy pronouncements, is a relatively recent development. For a long time, the government implemented a policy that emphasized economic development, with little regard for conservation. Natural resource exploitation was heavily encouraged since the American and Philippine Commonwealth periods. In fact, from the 1940s to the 1970s, the Philippines was one of the world’s leading exporter of logs. This bias toward extraction and utilization led to the degradation of Philippine forests and marine resources, with the country as a whole gaining little from this policy, and which benefited only a small, privileged segment of society.
2. In 1987, the Philippine Constitution declared that the main goal of environment and natural resources management in the country should be threefold, namely: (i) environmental protection; (ii) economic development and poverty alleviation, and (iii) the promotion of social justice and equity. It brought to the fore the Philippine Environmental Policy (PEP), embodied in Presidential Decree No. 1151 (1977). This set the stage for a policy shift from exploitation to management beginning with the 1989 Philippine National Strategy for Sustainable Development and the 1996 Action Plan for Sustainable Development, known as the Philippine Agenda 21. Executive Order (EO) No. 263 (1995) ushered in Community-Based Forest Management (CBFM) as a strategy for sustainable forest management. Several laws such as the National Integrated Protected Areas System Act and the Indigenous Peoples Rights Act, and the Fisheries Code gave impetus to resources conservation and community-based management.
3. A comprehensive body of laws covering almost every aspect of the environment and natural resources (ENR) sector was passed since then. The Philippines has sound and comprehensive environmental laws and policies. A comprehensive framework for environmental management was set in place to replace the piecemeal legislation which prevailed in the past. These laws include the Clean Air Act (1999), the Ecological Solid Waste Management Act (2000), and the Clean Water Act (2004). The gains that could have been achieved by these legal instruments are marred by weak implementation because of inadequate capacity and financial constraints both at the national and local levels. Effective implementation is largely stifled by a highly regulatory and control-oriented approach that emphasizes compliance with rigid bureaucratic procedures, from overlap with many laws, from more attention being given to procedural compliance rather than technical contents, and from a complex and poor system of follow-up and monitoring.
4. The sustainable development agenda has been further strengthened by the formulation of the Medium-Term Philippine Development Plan (MTPDP) 2004–2010 and the country’s adherence to the Millennium Development Goals. The MTPDP identified five goals relating to the environment and natural resources sector:

  • Sustainable and more productive utilization of natural resources to promote investments and entrepreneurship

  • Promotion of responsible mining that adheres to the principles of sustainable development: economic growth, environmental protection, and social equity

  • Strengthening the protection given to vulnerable and ecologically fragile areas

  • Creating a healthier environment for the population

  • Mitigating the occurrence of natural disasters to prevent the loss of lives and properties.

5. Still, the country’s rich physical and biological resources are seriously under threat because the ecosystems that support them have been severely degraded. Box 1 presents a snapshot of the main environmental problems plaguing the country.


6. It is important to realize the true economic value of the environment by putting a price on environmental degradation and its impacts on human health. The costs of environmental damage vary, depending on the economic values measured and the economic valuation method used. The Philippine Country Environmental Analysis (CEA, 2009) presents the following estimates of the economic costs of the five major environmental problems in the country: (1) for outdoor air pollution (AP), the cost of disease is Php 900 million/year and the cost of mortality is Php72 billion/year; for indoor AP, the cost of disease is Php1.3 billion/year and the cost of mortality is Php27 billion/year, (2) for water pollution, sanitation and hygiene, the cost of both morbidity and mortality is Php126 billion/year,* (3) for coastal and marine resources, the cost of degradation at 2006 prices is Php5.4 billion/year, (4) for the over-extraction of forestry products the cost is Php2.7 billion/year, and (5) for soil erosion, the loss of productivity costs Php6.7 billion and for off-site costs the loss is Php27 billion.

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